Charles Schwab Stock (NYSE:SCHW)
According to the company’s founder and CEO, Charles Schwab (NYSE:SCHW) attracted more than $53 billion in net new customer assets in March, the second-biggest monthly total in the firm’s history. As a result, Charles Schwab surged.
In a blog published on the company’s website late Thursday, Founder and Co-Chairman Charles Schwab and CEO and Co-Chairman Walt Bettinger wrote, “Our business is extremely robust.” They elaborated that the company “experienced a very strong first quarter,”, particularly in its trading and wealth management divisions.
The two also detailed how the Federal Reserve’s stricter stance has affected the company’s operations. According to them, “as interest rates have risen, investors have moved investment cash from relatively low-return accounts into higher yielding investments like money market funds.” Schwab is included in this group of financial institutions.
The trend will level out in the near future. They said five to ten percent of a client’s total Schwab assets are frequently held in transactional cash. While it rises during times of unpredictability, Schwab and Bettinger note that “history suggests the movement of cash into investments such as money markets, bonds, and CDs reaches a peak and then returns back towards historical norms.”
Schwab’s cost of capital does rise with the rising interest rates and “therefore has some impact on earnings,” they said. However, the cost of capital is expected to decline. When added to the organic expansion of our company and the reduction of operating expenditures, we should see an increase in profits.
They also noted the possibility of a U.S. economic downturn. It may be moderate, but you never know, they remarked. However, stock market trends typically reverse during recessions because investors see the impending downturn as a buying opportunity.
At the April 17 Spring Business Update, Charles Schwab executives will provide shareholders with further details.
Featured Image: Unsplash @ PiggyBank
Author Shariq Khan 
